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Business Credit Cards vs Charge Cards: Which is Right for Your Business?

Editorial Note: This content is not provided by the card issuer. Opinions expressed here are author's alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer.This article contains references to products from our partners. We receive compensation if you apply through links in our content. You help support CreditDonkey by reading our website and using our links. (read more)

Is your business better off with a charge card or a credit card? Does it matter? Yes. Read this article to learn the important differences.

At the end of this article, we'll highlight some of the latest credit card and charge card promotions for small business owners.

Why Even Use a Separate Business Credit Card or Charge Card

Using a business credit card or charge card makes smart business sense. These cards help businesses leverage credit and/or get rewards for the things they buy.

Even sole proprietors, like freelancers and independent contractors, can benefit from using a separate business credit card or charge card.

Business cards typically have spending rewards categories that are more in line with common business expenses, like office supplies and phone charges. Business owners who use them will therefore see their rewards multiply more quickly than if they stick to a personal credit card with a rewards program that’s more focused on groceries and department-store purchases.

Plus, it just makes sense to keep your personal and business finances separate, both for record-keeping purposes and for taxes.

But there’s one matter you should figure out before you start comparing cards — should you go with a business credit card or a charge card?

People often group these two card types together, but there are key differences you should know before you apply.

The benefits may surprise you. Read on.

Charge Card vs Credit Card

Both cards have a similar premise: You get a short reprieve between when you buy something and when you have to fork over the cash for it. However, charge cards have a slight distinction that can be beneficial, depending on how disciplined you are about paying your bills and how much you need to keep your business spending in check.

How They’re Similar

With either a charge card or a credit card, the bank pays for your purchase and you’re expected to pay it back.

Like credit cards, you can find charge cards that offer sign-up bonus rewards and ongoing rewards. Also like some credit cards, charge cards may also charge an annual fee.

How They’re Different

The distinction comes down to how long you have to pay off the debt you accrue.

Balances and How You Pay:

Credit cards let you carry a balance (with interest):With a credit card, you’ll always want to pay off the balance every month, but you have the flexibility of taking your time when necessary (and pay interest charges for the privilege).

Charge cards are due in full:Charge cards are less forgiving; they want you to pay right away, by the due date, or you’ll have to pay an expensive late payment fee and you may have to give up ownership of the card if you keep missing payments.

So why would you even consider a charge card? Keep reading to find out.

Credit Limits and How You Spend:Another big difference is in the credit limit.

When you first sign up with a credit card, you may be surprised how little the credit card issuer trusts you by limiting how much you can put on the card.

However, with a charge card, there is no predetermined credit limit. For some people, that wide berth can be great, giving them leeway if they ever need to make a large purchase in the future. Keep in mind, no predetermined credit limit does not mean unlimited spending. Your purchasing power usually adjust based on your card usage, payment history, credit history, and other factors.

Reasons to Get a Charge Card

You can’t stand interest charges. With a charge card, you’re using a payment method that won’t cost interest as long as you pay when you’re supposed to. Unlike credit cards, you don’t have the threat of interest charges hanging over your head.

You know you can control your spending. Do you pride yourself on never spending beyond your means, and are you determined to use that philosophy for your business? Having a charge card can prompt business owners to stay disciplined, as they know they’ll have to pay off every purchase they make within a few weeks.

Unique benefits. While you lose the ability to carry a balance, many business charge cards come with unique benefits.

Another business charge card, the Plum Card from American Express OPEN, a CreditDonkey advertiser, offers a 1.5% discount when you pay early. While there is no cap on how much you can earn back by paying early, there is a $250 annual fee ($0 introductory annual fee for the first year) to keep in mind. If your business spends more than $1,389/month, read this Plum Card review to see if this charge card is right for your business.

Reasons to Get a Credit Card Instead

You need flexibility in your cash flow. While you usually strive to pay off your balance in full each month, sometimes your business needs the flexibility to repay the balance over time. That's when a credit card comes in handy since there's no hard deadline to pay off the entire balance as long as you make at least the minimum payment each month.

This feature comes in handy when your business needs to make a large purchase.

You want a promotional interest rate. Many business credit cards have a promotional interest rate to entice new customers to sign up. You’re not going to find that with a charge card.

It’s what you’re already used to. If you have used only personal credit cards for your personal spending, you may want to stick with what you already know — a business credit card. A charge card is similar enough where it shouldn’t be confusing — but as a business owner, you have things to deal with.

Which One Is Right for You?

Do you want the flexibility of a credit card to pay over time?

Or do you prefer the unique benefits that many charge cards offer? Will you always be able to pay off your balance each month and if there is a time when you can’t, will you be able to withstand the hefty late payment fee you’ll get stuck with? That’s a key question to ponder as you weigh the pros and cons of credit cards vs. charge cards.

Terms and limitations apply. For more information, click on the "Apply Now" button to visit the issuer's website.

Get rewarded for business as usual. Earn 2X points on everyday business purchases such as office supplies or client dinners.

2X applies to the first $50,000 in purchases per year, 1 point per dollar thereafter.

Enjoy the flexibility to put more purchases on the Card and earn rewards when you buy above your credit limit*.

More buying power for your business* means more opportunities to earn points. That's everyday business with the new Blue Business Plus Card.

*The amount you can spend above your credit limit is not unlimited. It adjusts with your use of the Card, your payment history, credit record, financial resources known to us, and other factors.

0.0% intro APR on purchases and balance transfers for 15 months, then a variable rate, currently 12.49%, 16.49% or 20.49%, based on your creditworthiness and other factors as determined at the time of account opening.

Disclaimer: The information for the U.S. Bank Business Edge™ Platinum has been collected independently by CreditDonkey. The card details on this page have not been reviewed or provided by the card issuer.

Business Charge Cards

Earn 50,000 Membership Rewards® points after you spend $10,000 and an extra 25,000 points after you spend an additional $10,000 all on qualifying purchases within your first 3 months of Card Membership.

Get 5X Membership Rewards® points on flights and prepaid hotels on amextravel.com.

Get 50% more Membership Rewards® points. That's 1.5 points per dollar, on each eligible purchase of $5,000 or more. You can get up to 1 million additional points per year.

35% Airline Bonus: Use Membership Rewards® Pay with Points for all or part of a flight with your selected qualifying airline, and you can get 35% of the points back, up to 500,000 bonus points per calendar year.

You can also receive 35% points back on all First and Business class flights, with all airlines available through American Express Travel.

You can enjoy access to The American Express Global Lounge Collection℠ offering access to the most lounges across the globe, when compared with other U.S. credit card offerings. As of 6/2017

Sarah Johnson is the senior editor of CreditDonkey, a credit card comparison and financial education website. Write to Sarah Johnson at sarah@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped small business owners make savvy financial and lifestyle decisions. (read more)

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. This site may be compensated through the Advertiser's affiliate programs.

Disclaimer: The information for the U.S. Bank Business Edge™ Platinum has been collected independently by CreditDonkey. The card details on this page have not been reviewed or provided by the card issuer.

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About CreditDonkey® CreditDonkey is a credit card comparison website. We publish data-driven analysis to help you save money & make savvy financial decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

†Advertiser Disclosure: Many of the card offers that appear on this site are from companies from which CreditDonkey receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditDonkey does not include all companies or all offers that may be available in the marketplace.

*See the card issuer's online application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However, all information is presented without warranty. When you click on the "Apply Now" button you can review the terms and conditions on the card issuer's website.

CreditDonkey does not know your individual circumstances and provides information for general educational purposes only. CreditDonkey is not a substitute for, and should not be used as, professional legal, credit or financial advice. You should consult your own professional advisors for such advice.